The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and
summary of significant accounting policies
Business
InvenSense, Inc. (the Company) was incorporated in California in June 2003 and reincorporated in Delaware in January 2004. The
Company designs, develops, markets and sells sensor systems on a chip, including accelerometers, gyroscopes and microphones for the mobile, wearable, smart home, gaming, industrial, and automotive market segments. The Company delivers leading
solutions based on its advanced motion and sound technology and is dedicated to bringing the best-in-class size, performance and cost solutions to market. The Company targets solutions such as: smartphones, tablets, wearables, console and portable
video gaming devices, digital television and set-top box remote controls, fitness accessories, sports equipment, digital still cameras, automobiles, ultra-books, laptops, hearing aids, stabilization systems, tools, navigation devices, remote
controlled toys and other household consumer and industrial devices.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto for the fiscal year ended April 3, 2016 included in the Companys Annual Report on Form 10-K filed on May 25, 2016 with the Securities and Exchange Commission
(SEC). No material changes have been made to the Companys significant accounting policies since the Companys Annual Report on Form 10-K for the fiscal year ended April 3, 2016.
Certain significant business risks and uncertainties
The Company participates in the high-technology industry and believes that a number of factors including, but not limited to the following
could have a material effect on the Companys future financial position, results of operations, or cash flows: reliance on a limited number of primary customers to support the Companys revenue generating activities; changes in end-user
demand for the products manufactured and sold by the Company and its customers; the receipt, reduction, cancellation or delay of significant orders by customers; advances and trends in new technologies and industry standards; new product
announcements and introductions by the Companys competitors; the general cyclicality and seasonality of the semiconductor and consumer electronics industries and the resulting effect on the Companys business; market acceptance of the
Companys and its customers products; the Companys development and introduction of new products on a timely basis; developing new sales channels and attracting new customers; significant warranty claims, including those not covered
by the Companys suppliers; delays in the Companys customers ability to manufacture and ship products that incorporate the Companys products caused by internal and external factors unrelated to the Companys business and
that are out of its control; shortages of key third party components; the effects of competitive pricing pressures, including decreases in average selling prices of the Companys products; write-downs of inventory for excess quantity, changes
in business priorities, technological obsolescence and erosion in net realizable value; strategic relationships, including key component suppliers; litigation or claims against the Company based on intellectual property, patent, product, regulatory,
or other factors; and the Companys ability to attract and retain employees necessary to support its growth. Further information on potential risks that could affect the Companys business and financial results is included in the
Companys Annual Report on Form 10-K for the year ended April 3, 2016 filed with SEC on May 25, 2016.
Basis of consolidation
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP,
and include the Companys accounts and the accounts of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The functional currency of each of the Companys subsidiaries is the
U.S. dollar. Foreign currency gains or losses are recorded as other income (expense), net, in the condensed consolidated statements of operations.
Fiscal year
The Companys fiscal
year is a 52 or 53 week period ending on the Sunday closest to March 31. Fiscal year 2016 was a 53-week fiscal year ended April 3, 2016 (Fiscal year 2016). The extra week was included in the Companys fourth fiscal quarter
ended April 3, 2016. The Companys fiscal year ended March 29, 2015 (fiscal year 2015) was comprised of 52 weeks.
The first and second fiscal quarters in each of the two most recent fiscal years included 13 weeks.
7
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and applicable rules and
regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and
regulations.
The condensed consolidated balance sheet as of April 3, 2016, included herein was derived from the audited financial
statements as of that date, but does not include all disclosures required by GAAP. The unaudited interim condensed consolidated financial statements, in the opinion of management, reflect adjustments, consisting of all normal recurring adjustments,
necessary to present fairly the Companys financial position, results of operations, comprehensive loss and cash flows for the interim periods. The results of operations for the period ended October 2, 2016 is not necessarily indicative of the
results to be expected for the fiscal year ending April 2, 2017 or for any future year or interim period.
Use of estimates
The preparation of the Companys condensed consolidated financial statements and related notes in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and related notes and the reported
amounts of income and expenses during the reporting period. Significant estimates included in the condensed consolidated financial statements and related notes include income taxes, inventory valuation, stock-based compensation, loss contingencies,
warranty reserves, goodwill, valuation of acquired assets, and valuation of convertible senior note, including the related convertible notes hedges and warrants. These estimates are based upon information available as of the date of the condensed
consolidated financial statements, and actual results could differ from those estimates.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a
business combination. In accordance with Accounting Standard Codification (ASC) 350, the Company reviews goodwill for impairment at the reporting unit level on an annual basis or whenever events or changes in circumstances indicate the
carrying value may not be recoverable. As the Company uses the market approach to assess impairment, its common stock price is an important component of the fair value calculation. The Company has determined that it has a single reporting unit for
purposes of performing its goodwill impairment test. The Company monitors the recoverability of goodwill recorded in connection with acquisitions annually, or whenever events or changes in circumstances indicate the carrying value may not be
recoverable. The Company performs the annual goodwill impairment analysis in the third quarter of each fiscal year. As of October 2, 2016, no events or changes in circumstances indicate the carrying value may not be recoverable.
Concentration of credit risk
The
majority of the Companys products are shipped to distributors, original design manufacturers and contract manufacturers (collectively referred to as intermediaries), who are the legal counter-parties to the Companys sales.
When the Company references customers, sales and revenue in this report, the Company is referring to the manufacturers of consumer electronics devices who are the end customers for our products. However, any disclosure about the composition of the
Companys accounts receivable refers to the intermediaries. Some of the Companys intermediaries may serve more than one of the Companys customers. As a result, attempting to compare or correlate disclosures about the
Companys accounts receivable composition as of a particular date with the disclosures regarding revenues generated by the Companys customers for the period ending on the same date can be difficult or misleading.
One distributor accounted for 66% of accounts receivable and one customer accounted for 14% of accounts receivable at October 2, 2016.
One distributor accounted for 49% of accounts receivable and one customer accounted for 20% of accounts receivable at September 27, 2015.
For the three months ended October 2, 2016, Apple Inc. (Apple) and GH Development Holdings Limited (GHIC)
accounted for 58% and 11% of total net revenue, respectively. For the three months ended September 27, 2015, Apple and Samsung Electronics Co., Ltd. (Samsung) accounted for 34% and 19% of total net revenue, respectively. For the six
months ended October 2, 2016, Apple accounted for 53% of net revenue. For the six months ended September 27, 2015, Apple and Samsung accounted for 36% and 21% of total net revenue, respectively.
8
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Warranty
The Company offers one year standard warranty on its products. In selective cases, the warranty period can be extended to multiple years. The
Companys accrual for anticipated warranty costs includes managements judgment regarding anticipated rates of warranty claims and associated repair costs. The following table summarizes the activity related to product warranty liability
during the six months ended October 2, 2016 and September 27, 2015:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
October 2,
2016
|
|
|
September 27,
2015
|
|
|
|
(in thousands)
|
|
Beginning balance
|
|
$
|
625
|
|
|
$
|
341
|
|
Provision for warranty
|
|
|
682
|
|
|
|
421
|
|
Adjustments related to changes in estimate
|
|
|
(519
|
)
|
|
|
(204
|
)
|
Less: actual warranty costs
|
|
|
(18
|
)
|
|
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
770
|
|
|
$
|
476
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the
period, which excludes dilutive unvested restricted stock. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding, including unvested restricted stock, certain warrants to
purchase common stock and potential dilutive shares from the dilutive effect of outstanding stock options using the treasury stock method. In periods in which the Company has reported a net loss, the common stock equivalents are excluded from the
calculation of diluted net loss per share of common stock as their effect is antidilutive under the treasury stock method.
The following
table presents the calculation of basic and diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 2,
2016
|
|
|
September 27,
2015
|
|
|
October 2,
2016
|
|
|
September 27,
2015
|
|
|
|
(in thousands, except per share data)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(12,510
|
)
|
|
$
|
5,693
|
|
|
$
|
(32,695
|
)
|
|
$
|
(154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in computing basic net income (loss) per share
|
|
|
93,657
|
|
|
|
91,574
|
|
|
|
93,447
|
|
|
|
91,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in computing basic net income (loss) per share
|
|
|
93,657
|
|
|
|
91,574
|
|
|
|
93,447
|
|
|
|
91,325
|
|
Effect of potentially dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and unvested restricted stock
|
|
|
|
|
|
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in computing diluted net income (loss) per share
|
|
|
93,657
|
|
|
|
92,569
|
|
|
|
93,447
|
|
|
|
91,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.13
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.35
|
)
|
|
$
|
(0.00
|
)
|
Diluted
|
|
$
|
(0.13
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.35
|
)
|
|
$
|
(0.00
|
)
|
9
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following summarizes the potentially dilutive securities outstanding at the end of each
period that were excluded from the computation of diluted net income (loss) per share for the periods presented as their effect would have been antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 2,
|
|
|
September 27,
|
|
|
October 2,
|
|
|
September 27,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Employee stock options
|
|
|
12,033
|
|
|
|
7,382
|
|
|
|
11,609
|
|
|
|
9,059
|
|
Unvested restricted stock units
|
|
|
5,212
|
|
|
|
2,989
|
|
|
|
5,112
|
|
|
|
4,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total antidilutive securities
|
|
|
17,245
|
|
|
|
10,371
|
|
|
|
16,721
|
|
|
|
13,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In November 2013, the Company issued $175.0 million aggregate principal amount of 1.75% Convertible Senior
Notes due on November 1, 2018 (the Notes). On or after August 1, 2018 until the maturity date, the Notes may be converted at the option of the holders under certain circumstances. The conversion rate is initially 45.683 shares
per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $21.89 per share of common stock), subject to certain adjustments (see Note 5).
Segment information
The Company operates
in one operating segment, the design, development, manufacture and marketing of sensor systems on a chip. The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by Financial Accounting Standards Board
(FASB) ASC 280 Segment Reporting. Enterprise-wide information is provided in accordance with ASC 280. Geographical revenue information is based on the location of the head offices of the Companys customers. Property and
equipment information is based on the physical location of the assets at the end of each fiscal period.
Property and equipment, net by
country was as follows:
|
|
|
|
|
|
|
|
|
|
|
October 2,
|
|
|
April 3,
|
|
Country
|
|
2016
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Taiwan
|
|
$
|
22,325
|
|
|
$
|
25,183
|
|
United States
|
|
|
8,861
|
|
|
|
9,207
|
|
Other
|
|
|
1,954
|
|
|
|
1,881
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,140
|
|
|
$
|
36,271
|
|
|
|
|
|
|
|
|
|
|
10
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Net revenue from unaffiliated customers by location of the Companys customers
headquarters offices was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 2,
|
|
|
September 27,
|
|
|
October 2,
|
|
|
September 27,
|
|
Region
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
United States
|
|
$
|
50,193
|
|
|
$
|
42,913
|
|
|
$
|
80,298
|
|
|
$
|
86,716
|
|
China
|
|
|
14,844
|
|
|
|
26,010
|
|
|
|
27,290
|
|
|
|
50,616
|
|
Korea
|
|
|
5,074
|
|
|
|
24,469
|
|
|
|
10,868
|
|
|
|
53,192
|
|
Japan
|
|
|
4,873
|
|
|
|
8,028
|
|
|
|
10,153
|
|
|
|
12,164
|
|
Taiwan
|
|
|
3,583
|
|
|
|
7,576
|
|
|
|
9,008
|
|
|
|
10,762
|
|
Rest of world
|
|
|
1,264
|
|
|
|
3,549
|
|
|
|
2,850
|
|
|
|
5,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
79,831
|
|
|
$
|
112,545
|
|
|
$
|
140,467
|
|
|
$
|
218,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A majority of sales to U.S. headquartered companies are sold to their distributors or contract manufacturers
located overseas.
Recent accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses. Under the new guidance, credit losses for certain
types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their
origination. The new guidance will be effective for the Company starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. The Company is in the process of determining the effects the
adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early.
In March, 2016, the FASB
issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, CompensationStock Compensation. The new guidance simplifies several aspects of the accounting for employee share-based
payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance will be
effective for the Company starting in the first quarter of fiscal 2018. Early adoption is permitted in any annual or interim period. The Company is in the process of determining the effects the adoption will have on its consolidated financial
statements as well as whether to adopt the new guidance early.
In February 2016, the FASB issued new guidance related to leases that
outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than
12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company starting in the
first quarter of fiscal 2020. Early adoption is permitted. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early.
11
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with
Customers (Topic 606). ASU No. 2014-09 provides guidance that companies will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in
exchange for those goods or services. The standard requires public entities to apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2016, including interim reporting periods therein. On
April 1, 2015, the FASB proposed for a one-year deferral of the effective date for this pronouncement. The Company will be required to implement the new revenue recognition standard for the first quarter of fiscal year 2019. The Company is
currently evaluating the impact on its consolidated financial statements.
2.
|
Cash equivalents and available-for-sale investments
|
At October 2, 2016, cash and
cash equivalents totaled $37.0 million, of which $7.1 million was cash and $29.9 million was cash equivalents invested in money market funds. At October 2, 2016, $23.9 million of the cash and cash equivalents were held by the
Companys foreign subsidiaries. Additionally, as of October 2, 2016, the Company had short-term available-for-sale investments of $239.1 million.
At April 3, 2016, cash and cash equivalents totaled $41.1 million, of which $25.4 million was cash and $15.7 million was cash
equivalents invested in money market funds. At April 3, 2016, $21.0 million of the cash and cash equivalents were held by the Companys foreign subsidiaries. Additionally, as of April 3, 2016, the Company had short-term
available-for-sale investments of $243.8 million.
The Company applies the provisions of ASC 820-10,
Fair Value
Measurements
. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. As
such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820-10 requires disclosure that establishes a framework for measuring fair value
and expands disclosure about fair value measurements. The standard describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value. The inputs for the first two levels are considered observable and the last is
unobservable and include the following:
Level 1Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities;
Level 2Quoted prices in markets that are not active, or
inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3Unobservable inputs in which there is little or no market data, and as a result, prices or valuation techniques are employed
that require inputs that are significant to the fair value measurement.
This hierarchy requires the Company to use observable market
data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain financial assets and liabilities at fair value. The fair values of the Companys money market
funds were derived from quoted market prices as active markets for these instruments exist. The Company chose not to elect the fair value option as prescribed by ASC 825-10-05 Fair Value Option for its financial assets and liabilities
that had not been previously carried at fair value. Therefore, financial assets and liabilities not carried at fair value, such as accounts payable, are reported at their carrying values.
12
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fair value measurements at each reporting date were as follows:
October 2, 2016:
Assets and
liabilities measured at fair value on a recurring basis were presented in the Companys condensed consolidated balance sheet as of October 2, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2016
|
|
|
Quoted prices
in active markets
for identical
assets or liabilities
|
|
|
Significant
other
observable
inputs
|
|
|
Significant
other
unobservable
inputs
|
|
|
|
balance
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
29,891
|
|
|
$
|
29,891
|
|
|
$
|
|
|
|
$
|
|
|
Corporate notes and bonds
|
|
|
91,672
|
|
|
|
|
|
|
|
91,672
|
|
|
|
|
|
Commercial paper
|
|
|
116,604
|
|
|
|
|
|
|
|
116,604
|
|
|
|
|
|
U.S. agency securities
|
|
|
30,845
|
|
|
|
|
|
|
|
30,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
269,012
|
|
|
$
|
29,891
|
|
|
$
|
239,121
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
$
|
1,909
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
29,891
|
|
|
$
|
29,891
|
|
|
$
|
|
|
|
$
|
|
|
Short-term investments
|
|
|
239,121
|
|
|
|
|
|
|
|
239,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
269,012
|
|
|
$
|
29,891
|
|
|
$
|
239,121
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
$
|
1,909
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contingent consideration
|
|
$
|
1,909
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
|
|
|
Gross
|
|
|
Gross
|
|
|
October 2,
|
|
|
|
2016
|
|
|
unrealized
|
|
|
unrealized
|
|
|
2016
|
|
|
|
amortized cost
|
|
|
gain
|
|
|
loss
|
|
|
estimated FMV
|
|
|
|
(in thousands)
|
|
Corporate notes and bonds
|
|
$
|
91,763
|
|
|
$
|
1
|
|
|
$
|
(92
|
)
|
|
$
|
91,672
|
|
Commercial paper
|
|
|
116,770
|
|
|
|
1
|
|
|
|
(167
|
)
|
|
|
116,604
|
|
U.S. agency securities
|
|
|
30,829
|
|
|
|
16
|
|
|
|
|
|
|
|
30,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale investments
|
|
$
|
239,362
|
|
|
$
|
18
|
|
|
$
|
(259
|
)
|
|
|
239,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total aggregate fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
269,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of money market funds were derived from quoted market prices as active markets for these
instruments exist. The fair values of corporate notes and bonds, commercial paper and U.S. agency securities were derived from non-binding market consensus prices that are corroborated by observable market data.
None of the gross unrealized losses as of October 2, 2016 were considered to be other-than-temporary impairments.
There were no transfers of assets measured at fair value between Level 1 and Level 2 during the six months ended October 2,
2016.
13
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
April 3, 2016:
Assets and liabilities measured at fair value on a recurring basis were presented in the Companys condensed consolidated balance sheet as
of April 3, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3,
2016
balance
|
|
|
Quoted prices
in active markets
for identical
assets or liabilities
Level 1
|
|
|
Significant
other
observable
inputs
Level 2
|
|
|
Significant
other
unobservable
inputs
Level 3
|
|
|
|
(in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
15,697
|
|
|
$
|
15,697
|
|
|
$
|
|
|
|
$
|
|
|
Corporate notes and bonds
|
|
|
163,675
|
|
|
|
|
|
|
|
163,675
|
|
|
|
|
|
Commercial paper
|
|
|
45,473
|
|
|
|
|
|
|
|
45,473
|
|
|
|
|
|
U.S. agency securities
|
|
|
34,607
|
|
|
|
|
|
|
|
34,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
259,452
|
|
|
$
|
15,697
|
|
|
$
|
243,755
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
$
|
1,909
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
15,697
|
|
|
$
|
15,697
|
|
|
$
|
|
|
|
$
|
|
|
Short-term investments
|
|
|
243,755
|
|
|
|
|
|
|
|
243,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
259,452
|
|
|
$
|
15,697
|
|
|
$
|
243,755
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
$
|
1,909
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contingent consideration
|
|
$
|
1,909
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3,
2016
amortized cost
|
|
|
Gross
unrealized
gain
|
|
|
Gross
unrealized
loss
|
|
|
April 3,
2016
estimated FMV
|
|
|
|
(in thousands)
|
|
Corporate notes and bonds
|
|
$
|
163,712
|
|
|
$
|
19
|
|
|
$
|
(56
|
)
|
|
$
|
163,675
|
|
Commercial paper
|
|
|
45,480
|
|
|
|
3
|
|
|
|
(10
|
)
|
|
|
45,473
|
|
U.S. agency securities
|
|
|
34,589
|
|
|
|
25
|
|
|
|
(7
|
)
|
|
|
34,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale investments
|
|
$
|
243,781
|
|
|
$
|
47
|
|
|
$
|
(73
|
)
|
|
|
243,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total aggregate fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
259,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of money market funds were derived from quoted market prices as active markets for these
instruments exist. The fair values of corporate notes and bonds, commercial paper and U.S. agency securities were derived from non-binding market consensus prices that are corroborated by observable market data.
There were no transfers of assets measured at fair value between Level 1 and Level 2 during fiscal year 2016.
14
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Level 3 financial liabilities:
The following table provides a summary of changes in fair value of the Companys contingent consideration categorized as Level 3 for the
three and six months ended October 2, 2016 and September 27, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 2,
|
|
|
September 27,
|
|
|
October 2,
|
|
|
September 27,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,909
|
|
|
$
|
3,817
|
|
|
$
|
1,909
|
|
|
$
|
9,124
|
|
Change in fair value and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
1,909
|
|
|
$
|
3,817
|
|
|
$
|
1,909
|
|
|
$
|
3,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration on acquired businesses was measured at fair value using Level 3 inputs as defined in
the fair value hierarchy. The following table presents certain information about the significant unobservable inputs used in the fair value measurement for the contingent consideration measured at fair value on a recurring basis using significant
unobservable inputs:
|
|
|
|
|
Description
|
|
Valuation Techniques
|
|
Significant Unobservable Inputs
|
Liabilities: Contingent consideration
|
|
Present value of a Probability Weighted Earn-out model using an appropriate discount
rate.
|
|
Estimate of achieving the milestones.
|
An increase in the estimate of probability of meeting the milestones could result in a significantly higher
estimated fair value of the contingent consideration liability. Alternatively, a decrease in the estimate of probability of meeting the milestones could result in a significantly lower estimated fair value of contingent consideration liability. The
fair value of contingent consideration was derived from a probability weighted earn-out model of future contingent payments. The cash payments are expected to be made upon meeting the milestones. The initial valuation of the contingent consideration
was based on a collaborative effort of the Companys engineering and finance departments, and third party valuation experts. The estimate of meeting the milestones and discount rates is reviewed quarterly and updated as and when necessary.
Potential valuation adjustments will be made to adjust the contingent consideration payments. These adjustments will be recorded in the statements of operations.
In fiscal year 2016, the fair value of contingent consideration, net declined by $5.3 million. The decline in fair value was the result of a
reduction in the probability of a design win milestone associated with the Movea, S.A. (Movea) acquisition from 50% to 0% and a reduction in the probability of a design win associated with the Trusted Positioning, Inc. (TPI)
acquisition from 50% to 0%. The gross declines in fair value of the design win milestones for Movea and TPI were $4.0 million and $2.4 million, respectively, were recorded as a credit to research and development expense. The earn-out payments for
the Movea and TPI design win milestones were not made as these milestones were not met and expired during fiscal year 2016. Offsetting the gross declines was an increase in the fair value of two TPI cloud application milestones as a result of an
increase in the estimated probability of achievement of those milestones. The increase in the fair value of the cloud application milestones was $1.1 million, which was recorded as a debit to research and development expense in fiscal year 2016. A
design milestone for TPI was achieved and the payment of $1.9 million was made in fiscal year 2016. The last milestone of $1.9 million for TPI is expected to be paid in fiscal year 2017.
3. Balance sheet details
Inventories
Inventories at October 2, 2016 and April 3, 2016 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
April 3, 2016
|
|
|
|
(in thousands)
|
|
Work in process
|
|
$
|
30,381
|
|
|
$
|
40,329
|
|
Finished goods
|
|
|
15,720
|
|
|
|
21,968
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
46,101
|
|
|
$
|
62,297
|
|
|
|
|
|
|
|
|
|
|
15
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Prepaid expenses and other current assets
Prepaid expenses and other current assets at October 2, 2016 and April 3, 2016 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
April 3, 2016
|
|
|
|
(in thousands)
|
|
Prepaid expenses
|
|
$
|
5,647
|
|
|
$
|
5,256
|
|
Income tax receivable
|
|
|
42
|
|
|
|
156
|
|
Other receivables
|
|
|
1,031
|
|
|
|
1,676
|
|
Other current assets
|
|
|
2,467
|
|
|
|
2,162
|
|
|
|
|
|
|
|
|
|
|
Total prepaid expenses and other current assets
|
|
$
|
9,187
|
|
|
$
|
9,250
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
Property and equipment at October 2, 2016 and April 3, 2016 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
April 3, 2016
|
|
|
|
(in thousands)
|
|
Production and lab equipment
|
|
$
|
55,083
|
|
|
$
|
52,821
|
|
Computer equipment and software
|
|
|
10,410
|
|
|
|
9,074
|
|
Equipment under construction
|
|
|
678
|
|
|
|
607
|
|
Leasehold improvements and furniture and fixtures
|
|
|
8,400
|
|
|
|
8,396
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
74,571
|
|
|
|
70,898
|
|
Accumulated depreciation and amortization
|
|
|
(41,431
|
)
|
|
|
(34,627
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipmentnet
|
|
$
|
33,140
|
|
|
$
|
36,271
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the three and six months ended October 2, 2016 was $3.5 million and $6.8 million,
respectively. Depreciation expense for the three and six months ended September 27, 2015 was $3.2 million and $6.2 million, respectively. Equipment under construction consists primarily of production and lab equipment. Equipment under
construction is not subject to depreciation until it is available for its intended use. All of the equipment under construction is expected to be completed and placed in service by the end of fiscal 2017.
Accrued liabilities
Accrued liabilities
at October 2, 2016 and April 3, 2016 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
April 3, 2016
|
|
|
|
(in thousands)
|
|
Payroll-related expenses
|
|
$
|
8,569
|
|
|
$
|
8,030
|
|
Bonuses
|
|
|
3,686
|
|
|
|
5,040
|
|
Contingent consideration, current portion
|
|
|
1,909
|
|
|
|
1,909
|
|
Deferred revenue
|
|
|
1,618
|
|
|
|
1,949
|
|
Legal fees
|
|
|
694
|
|
|
|
197
|
|
Accrued contractual coupon interest payable on convertible senior notes
|
|
|
1,316
|
|
|
|
1,313
|
|
Income tax payable
|
|
|
1,150
|
|
|
|
553
|
|
Other tax payable
|
|
|
768
|
|
|
|
768
|
|
Customer deposits
|
|
|
2,582
|
|
|
|
4,008
|
|
Other accrued liabilities
|
|
|
8,831
|
|
|
|
6,481
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
31,123
|
|
|
$
|
30,248
|
|
|
|
|
|
|
|
|
|
|
16
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other long-term liabilities
Other long-term liabilities at October 2, 2016 and April 3, 2016 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
April 3, 2016
|
|
|
|
(in thousands)
|
|
Long-term tax payable
|
|
$
|
14,943
|
|
|
$
|
13,928
|
|
Deferred rent
|
|
|
3,001
|
|
|
|
3,436
|
|
Deferred tax liabilities
|
|
|
2,554
|
|
|
|
3,026
|
|
Deferred revenue
|
|
|
3,700
|
|
|
|
4,100
|
|
Long-term debt
|
|
|
2,412
|
|
|
|
2,465
|
|
Other long-term liabilities
|
|
|
93
|
|
|
|
275
|
|
|
|
|
|
|
|
|
|
|
Total other long-term liabilities
|
|
$
|
26,703
|
|
|
$
|
27,230
|
|
|
|
|
|
|
|
|
|
|
4.
|
Commitments and contingencies
|
Operating lease obligations
The Company has non-cancelable operating leases for its facilities through fiscal year 2022.
Future minimum lease payments, net of future minimum lease income, under operating leases as of October 2, 2016 are as follows:
|
|
|
|
|
|
|
Amount
|
|
Fiscal Years Ending:
|
|
(in thousands)
|
|
2017 (remainder)
|
|
$
|
2,949
|
|
2018
|
|
|
6,524
|
|
2019
|
|
|
6,691
|
|
2020
|
|
|
5,339
|
|
2021
|
|
|
1,406
|
|
Beyond
|
|
|
514
|
|
|
|
|
|
|
Total
|
|
$
|
23,423
|
|
|
|
|
|
|
The Companys lease agreements provide for rental payments which have certain lease incentives and
graduated rental payments. As a result, the rent expense is recognized on a straight-line basis over the term of the lease. The Companys rental expense under operating leases, net of the rent income from subleases of $0.4 million and $0.8
million, was approximately $1.2 million and $2.3 million for the three and six months ended October 2, 2016, respectively. The Companys rental expense under operating leases, net of the rent income from subleases of $0.4 million and
$0.7 million, was approximately $1.2 million and $2.6 million for the three and six months ended September 27, 2015, respectively.
Purchase
Commitments
The Company has non-cancelable purchase commitments with its foundry vendors. Future minimum payments of $21.8 million
under the purchase commitments as of October 2, 2016 are due in less than twelve months.
17
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Legal proceedings and contingencies
From time to time the Company is involved in various disputes and litigation matters that arise in the ordinary course of our business,
including disputes and lawsuits related to intellectual property and employment issues. In addition, the Company is a party to class action lawsuits.
In January and March 2015, purported shareholders filed five substantially similar class action complaints in the U.S. District Court,
Northern District of California against the Company and two of the Companys current and former executives (Class Action Defendants) (Jim McMillan v. InvenSense, Inc., et al. Case No. 3:15-cv-00084-JD, filed January 7, 2015; William
Lendales v. InvenSense, Inc. et al., Case No. 3:15-cv-00142-VC, filed on January 12, 2015; Plumber & Steamfitters Local 21 Pension Fund v. InvenSense, Inc., et al., Case No. 5:15-cv-00249-BLF, filed on January 16, 2015; William B. Davis vs.
InvenSense, Inc., et al., Case No. 5:15-cv-00425-RMW, filed on January 29, 2015; and Saratoga Advantage Trust Technology & Communications Portfolio v. InvenSense et al., Case No. 3:15-cv-01134, filed on March 11, 2015). On April 23, 2015, three
of those cases were consolidated into a single proceeding which is currently pending in the U.S. District Court, Northern District of California and captioned In re InvenSense, Inc. Securities Litigation, Case No. 3:15-cv-00084-JD (the
Securities Case), and the Vossen Group was designated as lead plaintiff; the other two cases (Lendales and Saratoga Advantage Trust) were voluntarily dismissed in March and June 2015, respectively. On May 26, 2015, the lead plaintiffs
filed a consolidated amended class action complaint, which alleges that the defendants violated the federal securities laws by making materially false and misleading statements regarding our business results between July 29, 2014 and October 28,
2014, and seeks unspecified damages along with plaintiffs costs and expenses, including attorneys fees. On June 25, 2015, the Class Action Defendants filed a motion seeking dismissal of the case. A ruling granting the motion in part and
denying it in part, and giving the lead plaintiffs leave to file an amended complaint, issued on March 28, 2016. The lead plaintiffs filed an amended complaint on April 18, 2016. On May 5, 2016, the Class Action Defendants filed a motion seeking
dismissal of the amended complaint. The motion was argued and submitted on June 29, 2016; the court has not yet filed an order ruling on the motion. In light of the unresolved legal issues, the amount of any potential loss cannot be estimated. At
this stage, the Company is unable to predict the outcome of this matter and, accordingly, cannot estimate the potential financial impact on the Companys business, operating results, cash flows or financial position.
In addition, in January and March 2015, other purported shareholders filed three substantially similar shareholder derivative complaints
against two of our current and former officers and several of our current and former directors, two in the U.S. District Court, Northern District of California and a third in Santa Clara Superior Court (George E Rollins v. Behrooz Abdi et al., Case
No. 5:15-cv-00184-PSG, filed on January 13, 2015; Linda Karr v. Behrooz Abdi et al., Case No. 5:15-cv-00200-NC, filed on January 14, 2015; and Robert Bilbrey v. Behrooz Abdi et al., Case No. 1-15-CV-278742 was filed on March 20, 2015). The two
federal court derivative actions have been consolidated into In re InvenSense, Inc. Derivative Litigation, Case No. 5:15-cv-00184-PSG. In June 2016, other purported shareholders filed a substantially similar shareholder derivative complaint against
three of our current and former officers and several of our current and former directors in the Superior Court of the Commonwealth of Massachusetts, Suffolk County (Valerie Caveglia v. Jon Olson, et al., Civil Action No. 16-1971-BLS-1)
(collectively, the Derivative Cases). In the Derivative Cases complaints, the plaintiffs make allegations similar to those presented in the Securities Case, but the plaintiff asserts various state law causes of action, including claims
of breach of fiduciary duty and unjust enrichment. The Company has undertaken an evaluation of these complaints. Plaintiffs in all four of the Derivative Cases have agreed to, and the courts have entered, indefinite stays pending developments in the
Securities Case.
The semiconductor and MEMS industries are characterized by companies that hold large numbers of patents and other
intellectual property rights and that vigorously pursue, protect and enforce intellectual property rights.
Robert Bosch GmbH
(Bosch), one of the Companys competitors, and the Company have each previously made generalized assertions of potential patent infringement by the other. On October 28, 2015, the Company and Bosch resolved all assertions of
potential infringement between them and entered into a multi-year, worldwide patent cross license agreement for MEMS and sensor technologies, excluding patents covering InvenSenses CMOS-MEMS eutectic bonding production process and Boschs
two-layer porous silicon production process, and an upfront payment of $11.5 million to Bosch. The other terms of the settlement and the patent cross license agreement remain confidential and are not expected to have a material impact on the
Companys future results. Based on the status of the negotiations, the Company recognized a pre-tax charge of $11.7 million during the quarter ended June 28, 2015. On October 28, 2015, Bosch and the Company resolved all assertions of
potential infringement made by the other. There were no significant changes to the final terms which required any additional charge in the fiscal year 2016. In the future, other third parties may assert against the Company and its customers and
distributors, their patent and other intellectual property rights to technologies that are important to the Companys business.
18
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company is not aware of any other pending legal matters or claims, individually or in the
aggregate, that are expected to have a material adverse impact on its condensed consolidated financial position, results of operations, or cash flows. However, the Companys analysis of whether a claim may proceed to litigation cannot be
predicted with certainty, nor can the results of litigation be predicted with certainty. Nevertheless, defending any of these actions, regardless of the outcome, may be costly, time consuming, distract management personnel, and have a negative
effect on the Companys business. An adverse outcome in any of these actions, including a judgment or settlement, may have a material adverse effect on the Companys future business, operating results, and/or financial condition.
The Company indemnifies certain customers, distributors, suppliers and subcontractors for attorney fees and damages and costs awarded against
such parties in certain circumstances in which the Companys products are alleged to infringe third-party intellectual property rights, including patents, registered trademarks or copyrights. Indemnification costs are charged to operations as
incurred.
The Companys Third Amended and Restated Bylaws require the Company to indemnify its directors and officers and employees
to the fullest extent permitted by the Delaware General Corporation Law (DGCL). In addition, the Companys directors, the Companys chief executive officer and certain executive officers have entered into separate
indemnification agreements with the Company. The Companys Second Amended and Restated Certificate of Incorporation, as amended, limits the liability of directors to the Company or its stockholders to the fullest extent permitted by the DGCL.
The obligation to indemnify generally means that the Company is required to pay or reimburse the individuals reasonable legal expenses and possibly damages and other liabilities incurred in connection with these matters.
5. Convertible senior notes
In November
2013, the Company issued $175.0 million aggregate principal amount of 1.75% Convertible Senior Notes due on November 1, 2018 (the Notes), in a private placement to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933 (the Securities Act). The Notes have not been registered under the Securities Act, or applicable state securities laws or blue sky laws, and may not be offered or sold in the United States absent registration under
the Securities Act and applicable state securities laws or available exemptions from the registration requirements.
The Notes are senior
unsecured obligations of the Company and rank equally in right of payment with all of the Companys existing and future senior unsecured indebtedness and are junior to any of the Companys existing and future secured indebtedness. The
Notes pay interest in cash semi-annually (May and November) at a rate of 1.75% per annum. Net proceeds received by the Company, after issuance costs, were approximately $169.3 million.
On or after August 1, 2018 until the maturity date, the Notes may be converted at the option of the holders. Holders may convert the
Notes at their option prior to August 1, 2018 only under the following circumstances:
1) During any calendar quarter and only during
such calendar quarter, if the last reported sale price of the Companys common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately
preceding calendar quarter is greater than or equal to 130% of the conversion price of $21.89 on each applicable trading day;
2) During
the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last
reported sale price of our common stock and the conversion rate on each such trading day; or
3) Upon the occurrence of specified
corporate events, including if there is a fundamental change.
19
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Upon conversion, the Company will pay cash up to the aggregate principal amount of the Notes
to be converted and pay or deliver cash, shares of its own common stock or a combination of cash and shares of its own common stock, at the Companys election, in respect of the remainder, if any, of its conversion obligation in excess of the
aggregate principal amount of the Notes being converted.
The conversion rate is initially 45.683 shares per $1,000 principal amount of
the Notes (equivalent to an initial conversion price of approximately $21.89 per share of common stock), subject to certain adjustments.
The Notes are not redeemable by the Company prior to the maturity date. At an event of default or fundamental change, the principal amount of
the Notes plus accrued and unpaid interest may become due immediately at the Note holders option.
The Company separately accounts
for the liability and equity components of the Notes. The initial debt component of the Notes was valued at $135.7 million based on the contractual cash flows discounted at an appropriate comparable market non-convertible debt borrowing rate at
the date of issuance of 7.3%, with the equity component representing the residual amount of the proceeds of $39.3 million which was recorded as a debt discount. The issuance costs were allocated pro-rata based on the relative initial carrying
amounts of the debt and equity components, including the Note hedges and warrants transactions described below. As a result, $2.5 million of the issuance costs were allocated to the equity component of the Notes, $3.0 million of issuance costs
paid to the initial purchaser were accounted for as a debt discount and $0.25 million of the issuance costs were classified as other non-current assets. Debt issuance costs were reclassified and presented in the balance sheet as a direct
deduction from the carrying value of the debt liability, consistent with the presentation of a debt discount in the first quarter of the Companys fiscal year 2016 pertaining to the requirement of ASU 2015-03,
Simplifying the Presentation of
Debt Issuance Costs.
The debt discount and the issuance costs allocated to the debt component are amortized as additional interest expense over the term of the Notes using the effective interest method. As of October 2, 2016, the
remaining amortization period of the debt discount and the issuance costs is 2.1 years. The effective interest rate of the Notes is 7.84% per annum (1.75% coupon rate plus 6.09% of non-cash accretion expense).
Convertible notes hedges and warrants
Concurrent with the issuance of the Notes on November 6 and 7, 2013, the Company purchased call options for its own common stock to hedge
the Notes (the Note Hedge) and sold call options for its own common stock (the Warrants). The Note Hedges and Warrants transactions are structured to reduce the potential future economic dilution associated with the
conversion of the Notes and are excluded from the computation of diluted earnings per share for each period presented, as the Companys average stock price during each period is less than the conversion price.
The Note HedgesOn November 6 and 7, 2013, the Company purchased call options from a counterparty for an aggregate price of
approximately $39.1 million, which gives the Company the right to buy from the counterparty up to approximately 8.0 million shares of the Companys common stock at a price of $21.89 per share, subject to adjustments. The Note Hedge is
exercisable upon conversion of the Notes for a number of shares equal to the product of 0.045683 and amount of the converted Note. Upon exercise of the Note Hedge, the Company will receive from the counterparty cash, shares of the Companys
common stock, or a combination thereof, equal to the amount by which the market price per share of the Companys common stock exceeds $21.89 during the applicable valuation period. By the Note Hedge terms, the Company will receive cash and
shares in a combination that offsets share dilution caused by conversion of the Notes.
WarrantsOn November 6 and 7, 2013, the
Company sold call options to the same counterparty for approximately $25.6 million, which gives the counterparty the right to buy from the Company up to approximately 8.0 million shares of the Companys common stock at an exercise price of
$28.66 per share, subject to adjustments, on a series of days commencing on February 1, 2019 and ending May 13, 2019. Upon exercise of the Warrants, the Company has the option to deliver cash or shares of its common stock equal to the
difference between the market price on the exercise date and the strike price of the Warrants. Upon exercise of the Warrants, the Company will pay to the initial purchaser cash, shares of the Companys common stock, or a combination thereof (at
the Companys choice), equal to the amount by which the market price per share of the Companys common stock exceeds $28.66 during the applicable valuation period.
The Note Hedges and Warrants are classified in stockholders equity in the Companys condensed consolidated balance sheets.
20
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the principal amounts and related unamortized discount on the
Notes:
|
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
April 3, 2016
|
|
|
|
(in thousands)
|
|
Principal amount of the Notes
|
|
$
|
175,000
|
|
|
$
|
175,000
|
|
Unamortized discount on the Notes
|
|
|
19,565
|
|
|
|
23,809
|
|
Unamortized debt issuance costs
|
|
|
125
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
Net carrying value
|
|
$
|
155,310
|
|
|
$
|
151,038
|
|
|
|
|
|
|
|
|
|
|
The following table presents the amount of interest expense recognized related to the Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 2,
|
|
|
September 27,
|
|
|
October 2,
|
|
|
September 27,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Contractual coupon interest expense
|
|
$
|
764
|
|
|
$
|
764
|
|
|
$
|
1,528
|
|
|
$
|
1,528
|
|
Accretion of debt discount
|
|
|
2,144
|
|
|
|
1,986
|
|
|
|
4,243
|
|
|
|
3,931
|
|
Amortization of debt issuance costs
|
|
|
14
|
|
|
|
13
|
|
|
|
28
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense related to the Notes
|
|
$
|
2,922
|
|
|
$
|
2,763
|
|
|
$
|
5,799
|
|
|
$
|
5,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 2, 2016, the Companys aggregate future principal debt maturities are as follows:
|
|
|
|
|
Fiscal Year
|
|
October 2, 2016
|
|
|
|
(in thousands)
|
|
2019
|
|
$
|
175,000
|
|
|
|
|
|
|
Total
|
|
$
|
175,000
|
|
|
|
|
|
|
The Notes are shown in the accompanying condensed consolidated balance sheets at their original issuance
value, net of unamortized discount, and are not marked to market each period. The approximate fair value of the Notes as of October 2, 2016 was $169.6 million. The fair value of the Notes was determined using quoted market prices for similar
securities, which, due to limited trading activity, are considered Level 2 in the fair value hierarchy.
6. Stockholders equity
Stock plans
In July 2011, the
Companys Board of Directors and its stockholders approved the establishment of the 2011 Stock Incentive Plan (the 2011 Plan). The 2011 Plan provides for annual increases in the number of shares available for issuance thereunder on
the first business day of each fiscal year, equal to four percent (4%) of the number of shares of the Companys common stock outstanding as of such date, which resulted in an annual increase of 3.7 million shares for fiscal year 2017.
Under the 2011 Plan, the Board of Directors may grant either incentive stock options, nonqualified stock options, or stock awards to
eligible persons, including employees, nonemployees, members of the Board of Directors, consultants and other independent advisors who provide services to the Company.
The Companys 2004 Stock Incentive Plan (the 2004 Plan), was adopted by the Companys board of directors and approved by
the Companys stockholders on April 13, 2004, and was last amended on August 31, 2011. The 2004 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, to employees and any parent and subsidiary corporations employees, and for the grant of non-qualified stock options and restricted stock to employees, directors and consultants and any parent and subsidiary corporations
employees. The Company has not granted any additional awards under the 2004 Plan following the completion of the Companys initial public offering in November 2011. However, the 2004 Plan continues to govern the terms and conditions of
outstanding awards granted thereunder.
21
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Incentive stock options may only be granted to employees and at an exercise price of no less
than fair value on the date of grant. Nonqualified stock options may be granted at an exercise price of no less than fair value on the date of grant. For owners of more than 10% of the Companys common stock, options may only be granted for an
exercise price of not less than 110% of fair value, and these options generally expire 10 years from the date of grant. Stock options may be exercisable immediately but subject to repurchase. Stock options vest over the period determined by the
Board of Directors, generally four years.
Stock option activities of the Company under the 2011 Plan and 2004 Plan (the
Plans) are as follows (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
issued and
outstanding
|
|
|
Weighted-
average
exercise
price
|
|
|
Weighted-
average
remaining
contractual
term
(in years)
|
|
|
Aggregate
intrinsic
value
|
|
Balance April 3, 2016
|
|
|
10,126
|
|
|
$
|
12.76
|
|
|
|
7.53
|
|
|
$
|
5,016
|
|
Options granted
|
|
|
2,860
|
|
|
|
5.95
|
|
|
|
|
|
|
|
|
|
Exercised options
|
|
|
(33
|
)
|
|
|
6.40
|
|
|
|
|
|
|
|
|
|
Cancelled options
|
|
|
(981
|
)
|
|
|
14.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance October 2, 2016
|
|
|
11,972
|
|
|
$
|
10.97
|
|
|
|
7.67
|
|
|
$
|
6,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest October 2, 2016
|
|
|
10,636
|
|
|
$
|
11.22
|
|
|
|
7.49
|
|
|
$
|
5,461
|
|
Exercisable October 2, 2016
|
|
|
5,462
|
|
|
$
|
11.83
|
|
|
|
6.25
|
|
|
$
|
2,349
|
|
Valuation of stock-based awards
The Company applies the provisions of ASC 718-10 CompensationStock Compensation which establishes the accounting for
stock-based awards based on the fair value of the award measured at grant date. Accordingly, stock-based compensation cost is recognized in the condensed consolidated statements of operations as a component of both cost of revenues and
operating expenses over the requisite service period. ASC 718-10 requires tax benefits in excess of compensation cost to be reported as a financing cash flow rather than as a reduction of taxes paid. The determination of the fair value of
stock-based payment awards on the date of grant using the Black-Scholes option pricing model is affected by the volatilities of a peer group of companies based on industry, stage of life cycle, size and financial leverage, actual and projected
employee stock option exercise behaviors, risk-free interest rate and expected dividends. The Company uses historical experience to estimate expected term. The expected volatility was based on the historical stock volatilities of the Companys
historical data with that of a peer group of publicly listed companies over a period equal to the expected terms. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term. The Company
does not anticipate paying any cash dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero.
The
aggregate intrinsic value of the stock options exercised during the three and six months ended October 2, 2016 was $9,000 and $32,000, respectively. The aggregate intrinsic value of the stock options exercised during the three and six months ended
September 27, 2015 was $0.4 million and $2.6 million respectively. The aggregate intrinsic value was calculated as the difference between the exercise price of the stock options and the estimated fair market value of the underlying common
stock at the date of exercise.
22
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The number of options expected to vest takes into account an estimate of expected
forfeitures. As of October 2, 2016, the remaining unamortized stock-based compensation expense, reduced for estimated forfeitures related to non-vested options, was $17.4 million to be amortized over a weighted-average remaining period of
3.3 years. Total unrecognized expense will be adjusted for future changes in estimated forfeitures.
The Company used the following
weighted-average assumptions in determining stock-based compensation expense for options granted in the three and six months ended October 2, 2016 and September 27, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 2,
|
|
|
September 27,
|
|
|
October 2,
|
|
|
September 27,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Expected term (in years)
|
|
|
5.5
|
|
|
|
5.1
|
|
|
|
5.5
|
|
|
|
5.1
|
|
Volatility
|
|
|
51.2
|
%
|
|
|
44.4
|
%
|
|
|
49.2
|
%
|
|
|
45.1
|
%
|
Risk-free interest rate
|
|
|
1.2
|
%
|
|
|
1.5
|
%
|
|
|
1.4
|
%
|
|
|
1.5
|
%
|
Dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
The weighted-average grant date fair value of the Companys stock options granted in the three and six
month ended October 2, 2016 was $3.60 and $2.72 per share, respectively. The weighted-average grant date fair value of the Companys stock options granted in the three and six month ended September 27, 2015 was $5.33 and $6.06 per share,
respectively.
Restricted stock units and restricted stock
Restricted stock unit and restricted stock activity of the Company under the Plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted Average
Grant Date Fair
Value Per Share
|
|
|
|
(in thousands, except per share amount)
|
|
Restricted stock units and restricted stock activities
|
|
|
|
|
|
|
|
Unvested at April 3, 2016
|
|
|
4,972
|
|
|
$
|
13.47
|
|
Granted
|
|
|
1,320
|
|
|
|
6.54
|
|
Released
|
|
|
(604
|
)
|
|
|
15.76
|
|
Forfeited
|
|
|
(446
|
)
|
|
|
14.02
|
|
|
|
|
|
|
|
|
|
|
Unvested at October 2, 2016
|
|
|
5,242
|
|
|
$
|
11.41
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units and restricted stock granted to employees are generally subject to the employees
continued service to the Company over the vesting period. The fair value of restricted stock units and restricted stock is determined using the fair value of the Companys common stock on the date of the grant. Compensation expense is generally
recognized on a straight-line basis over the requisite service period of each grant adjusted for estimated forfeitures. As of October 2, 2016, the remaining unamortized stock-based compensation expense, reduced for estimated forfeitures related to
non-vested restricted stock units and restricted stock, was $38.1 million to be amortized over a weighted-average remaining period of 2.6 years.
The weighted-average grant-date fair value per share of restricted stock units and restricted stock awarded in the three and six months ended
October 2, 2016 was $7.46 and $6.54 per share, respectively. The weighted-average grant-date fair value per share of restricted stock units and restricted stock awarded in the three and six months ended September 27, 2015 was $11.77 and
$14.20 per share, respectively.
23
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2013 Employee stock purchase plan
Under the 2013 Employee Stock Purchase Plan, as amended (the ESPP), eligible employees may apply accumulated payroll deductions,
which may not exceed 10% of an employees compensation, to the purchase of shares of the Companys common stock at periodic intervals. The purchase price of stock under the ESPP is equal to 85% of the lower of (i) the fair market
value of the Companys common stock on the first day of each offering period, or (ii) the fair market value of the Companys common stock on the purchase date (as defined in the ESPP). Each offering period consists of one purchase
period of approximately six months duration.
At the 2016 and 2015 annual meetings of stockholders, stockholders of the Company approved
amendments to the ESPP to increase the number of shares of common stock reserved for future issuance by 2,000,000 shares and 1,000,000 shares, respectively, which brought the total amount of common stock reserved for issuance pursuant to the ESPP to
an aggregate of 3,400,000 shares. As of October 2, 2016, 722,000 shares had been purchased pursuant to the ESPP.
Compensation expense
recognized in connection with the ESPP was $0.3 million and $0.5 million for the three and six months ended October 2, 2016. Compensation expense recognized in connection with the ESPP was $0.2 million and $0.5 million for the three and six months
ended September 27, 2015.
Common stock
As of October 2, 2016 and April 3, 2016, common stock reserved for future issuance was as follows:
|
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
April 3, 2016
|
|
|
|
(in thousands)
|
|
Common stock reserved for issuance
|
|
|
|
|
|
|
|
Stock plans
|
|
|
|
|
|
|
|
|
Outstanding stock options
|
|
|
11,972
|
|
|
|
10,126
|
|
Outstanding restricted stock units and restricted stock
|
|
|
5,242
|
|
|
|
4,972
|
|
Reserved for future equity incentive grants
|
|
|
10,281
|
|
|
|
9,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,495
|
|
|
|
24,393
|
|
ESPP
|
|
|
2,678
|
|
|
|
1,000
|
|
Shares issuable upon exercise of warrants to purchase common stock
|
|
|
7,995
|
|
|
|
7,995
|
|
|
|
|
|
|
|
|
|
|
Total common stock reserved for future issuance
|
|
|
38,168
|
|
|
|
33,388
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
Total employee stock-based compensation cost for the Companys stock plans for the three and six months ended October 2, 2016 and
September 27, 2015 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
October 2,
|
|
|
September 27,
|
|
|
October 2,
|
|
|
September 27,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Cost of revenue
|
|
$
|
571
|
|
|
$
|
584
|
|
|
$
|
1,187
|
|
|
$
|
1,184
|
|
Research and development
|
|
|
4,217
|
|
|
|
4,002
|
|
|
|
8,291
|
|
|
|
7,838
|
|
Selling, general and administrative
|
|
|
4,257
|
|
|
|
4,462
|
|
|
|
7,743
|
|
|
|
8,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
$
|
9,045
|
|
|
$
|
9,048
|
|
|
$
|
17,221
|
|
|
$
|
17,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Income taxes
In the three and six months ended October 2, 2016, the Company recorded an income tax provision of $0.2 million and $2.1 million,
respectively. In the three and six months ended September 27, 2015, the Company recorded an income tax provision (benefit) of ($2.0) million and ($1.7) million, respectively. The primary difference between the 2016 effective tax rate and the
federal statutory tax rate relates to the valuation allowances on certain of the Companys net operating losses and tax credits, foreign tax rate differences, integration of acquired technologies, and non-deductible stock-based compensation
expense.
On July 27, 2015, the Tax Court issued an opinion (Altera Corp. et al. v. Commissioner) regarding the treatment of
stock-based compensation expense in intercompany cost-sharing arrangements. However, U.S. Treasury has not withdrawn the requirement to include stock-based compensation from its regulations. Also, there is uncertainty related to the Internal Revenue
Service (IRS) response to the Tax Court opinion, the final resolution of this issue, and the potential favorable benefits to the Company. As such, no impact will be recorded at this time. The Company will continue to monitor developments
related to this opinion and the potential impact of those developments on the Companys current and prior fiscal years.
The Company
does not provide for federal income taxes on undistributed earnings of its foreign subsidiaries because it is the Companys intent to reinvest earnings indefinitely offshore.
As of October 2, 2016, the total amount of gross unrecognized tax benefits was $34.2 million. If the gross unrecognized tax benefits as
of October 2, 2016 were realized in a subsequent period, this would result in a tax benefit of $18.5 million within the provision of income taxes at such time.
The Company is currently under examination by the IRS for the 2011 through 2014 tax years. The Company may be subject to examination by
California for tax years 2010 and forward. The Company is subject to routine examination for tax years 2008 and forward in various foreign tax jurisdictions in which it operates.
The Company is engaged in discussions and negotiations with the IRS regarding tax matters in the tax years 2011 through 2014. The balance of
the gross unrecognized tax benefits may decrease within the next twelve months due to lapses of applicable statutes of limitations and the completion of tax review cycles in various tax jurisdictions.
The Company is pursuing all available administrative remedies relative to these matters. Management believes that the Company has adequately
provided for any reasonably foreseeable outcomes related to these proposed adjustments and the ultimate resolution of these matters is unlikely to have a material effect on the Companys consolidated financial condition or results of
operations; however there is still a possibility that an adverse outcome of these matters could have a material effect on its consolidated financial condition and results of operations.
8. Acquisition
The Company completed one
acquisition in fiscal year 2017 and one acquisition in fiscal year 2016. The acquisitions have been accounted for under ASC 805. Under ASC 805, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable
intangible assets and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill, and was derived from expected benefits from
future technology development, synergies and the knowledgeable and experienced workforce who joined the Company after the acquisition.
25
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Fiscal year 2017
In August 2016, the Company acquired the pressure sensor business from Sensirion Holding AG and its affiliates used in the development of
capacitive-type monolithic digital pressure-sensor technology platform. The preliminary purchase price allocation reflected that the purchase price associated with the acquisition was approximately $9.8 million, of which $5.7 million was
allocated to developed technology with an estimated useful life of six years and $4.1 million was allocated to goodwill. This acquisition is not significant to the Companys results of operations.
Fiscal year 2016
In December 2015, the
Company acquired certain assets of Spirit Corp LLC and its affiliates used in the development of navigation solutions. The total cash consideration associated with the acquisition was approximately $7 million for which the purchase price was
attributable to the acquired in-process research and development. The fair value of in-process research and development was determined using a cost approach, which includes an estimate of time and expenses required to recreate the
intangible asset. The Company also will record approximately $1 million post-acquisition expense that may be payable in the future should certain specified milestones be met. This acquisition is not significant to the Companys
results of operations.
9. Goodwill and intangible assets
The Company monitors the recoverability of goodwill recorded in connection with acquisitions annually, or whenever events or changes in
circumstances indicate the carrying value may not be recoverable. There were no changes in the carrying amount of goodwill since April 3, 2016. The Company performs the annual goodwill impairment analysis during the third quarter of each fiscal
year. As of and for the six months ended October 2, 2016, the Company concluded that the $143.3 million of goodwill was not impaired.
Purchased intangible assets subject to amortization consist primarily of developed technology, customer relationships and patents and are
reported net of accumulated amortization. Developed technology, customer relationships and patents are amortized on a straight line basis over the estimated useful life of the assets. In-process research and development (IPR&D) is
assessed for impairment until the development is completed and products are available for sale.
During the six months ended October 2,
2016, one IPR&D project was released to production. The IPR&D value allocated to this project of $1.6 million was transferred to developed technology. The estimated useful life for this technology was five years. In fiscal year 2016, two
IPR&D projects were released to production. The IPR&D value allocated to the projects of $3.3 million and $1.7 million, respectively, were transferred to developed technology. The estimated useful life for each technology is five years.
26
INVENSENSE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amortization for acquired intangible assets for the three and six months ended
October 2, 2016 was approximately $2.5 million and $4.9 million, respectively. Amortization for acquired intangible assets for the three and six months ended September 27, 2015 was approximately $2.4 million and $4.5 million,
respectively. The following table represents intangible assets and accumulated amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Gross
|
|
|
amortization
|
|
|
Net
|
|
|
|
(in thousands)
|
|
Developed technology
|
|
$
|
56,580
|
|
|
$
|
21,746
|
|
|
$
|
34,834
|
|
Customer relationships
|
|
|
1,560
|
|
|
|
650
|
|
|
|
910
|
|
Patents
|
|
|
2,120
|
|
|
|
626
|
|
|
|
1,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets subject to amortization
|
|
|
60,260
|
|
|
|
23,022
|
|
|
|
37,238
|
|
IPR&D
|
|
|
6,750
|
|
|
|
|
|
|
|
6,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
67,010
|
|
|
$
|
23,022
|
|
|
$
|
43,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3, 2016
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Gross
|
|
|
amortization
|
|
|
Net
|
|
|
|
(in thousands)
|
|
Developed technology
|
|
$
|
49,310
|
|
|
$
|
17,159
|
|
|
$
|
32,151
|
|
Customer relationships
|
|
|
1,560
|
|
|
|
539
|
|
|
|
1,021
|
|
Patents
|
|
|
2,120
|
|
|
|
443
|
|
|
|
1,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets subject to amortization
|
|
|
52,990
|
|
|
|
18,141
|
|
|
|
34,849
|
|
IPR&D
|
|
|
8,320
|
|
|
|
|
|
|
|
8,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
|
$
|
61,310
|
|
|
$
|
18,141
|
|
|
$
|
43,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated future amortization expense related to intangible assets at October 2, 2016, is as follows:
|
|
|
|
|
|
|
Estimated
|
|
|
|
amortization
|
|
Fiscal Year
|
|
(in thousands)
|
|
2017 (remainder)
|
|
$
|
5,382
|
|
2018
|
|
|
10,764
|
|
2019
|
|
|
10,764
|
|
2020
|
|
|
6,820
|
|
2021
|
|
|
2,057
|
|
Thereafer
|
|
|
1,451
|
|
|
|
|
|
|
Total
|
|
$
|
37,238
|
|
|
|
|
|
|
27